Monday, November 2, 2009

What vanishing middle class?

There is a constant refrain from union officials and their allies in the media, academia and politics about the need to strengthen unions to restore the vanishing middle class.

Being unencumbered by too much formal education, such complaints seem very strange to me.

In our relatively classless society, terms like "middle class" are usually defined by household income and household income is analyzed by quintiles, or fifths. The third quintile is considered to be the middle class, the second the lower middle class and the fourth the upper middle class, the first the poor and the fifth the wealthy.

It is impossible for quintiles to disappear, vanish or even shrink. After all, a fifth is a fifth. (This analysis does not, of course, apply to fifths of good whiskey. They have been known to vanish, sometimes rapidly. I have witnessed this myself.)

Perhaps then, those who complain about a vanishing middle class believe that the purchasing power of the middle quintiles is diminishing. That, for example, the average household income of the third quintile is falling.

This information is expressed in both current and constant dollars. There's good news for those who fear a shrinking middle class. In constant 2008 dollars, average household income is up in every quintile. The growth isn't steady and it isn't uniform from quintile to quintile, but it is up across the board.

The alarmists can do some cherry picking to get numbers they want. For example, if one were to compare 1998 to 2008 it would show a decline, but if you compare 1997 to 2007 it shows and increase. Over the long haul the movement is upwards in all quintiles.

There are, of course, other dimensions to this issue. I'll discuss them in a future blog.

2 comments:

The unions’ claim that the middle class is disappearing has racist overtones. It’s supposed to evoke nostalgic thoughts of the suburban white nuclear family living in a ranch house barbecuing on the weekends and playing in the backyard above-ground pool. That "middle class" is truly disappearing.